INTERNAL ENVIRONMENT ANALYSIS

The greater the rate of change in a firm’s external environment, the more likely it is that internal
resources and capabilities will provide a secure foundation for long-term strategy.
The primary goal of resource analysis is not to value a company’s assets but to understand their
potential for creating competitive advantage. Information that Robert Mondavi Winery possesses
tangible fixed assets with a book value of $865 milion is a little use in assesing their strategic value.
To assess Robert Mondavi Winery ability to compete effectively in the world wine industry we need
to know about the composition of these assets , the location of land and buildings , plants, the types
of assets and so on. We have fuller information on a company’s tangible resources we explore how
we can create additional value from them.

Assesing their reach resources company considered how to strengthen the firm’s competitive
position. While competitors spent considerable amounts of money pursuing aggressive acquisition
strategies, Mondavi chose to focus on the organic growth of its premier brands. Mondavi said the
brands in our portfolio are all high-quality wines with strong market positions and excellent
management.

For most companies and also for Robert Mondavi Winery intangible resources are more
valuable than tangible resources. Brand names and other trademarks are a form of reputational assets,
like reputation technology is an intangible asset.

Beginning 1960’s till today Robert Mondavi Winery became one of America’s most innovative,
high–quality winemakers. The company first introduced new techniques to the California wine
industry, including cold fermentation, stainless steel tanks and use of small French oak barrels to age
fine wine. To stimulate demand for his products Robert Mondavi set out to educate American
consumers and to enhance their appriceation of fine wine. Robert Mondavi explained his philosophy
regarding fine wine: “ People who enjoy food, art, music, also enjoy fine wines and they enjoy
them more together… Wine is more than a drink. It is a culture.”

Mondavi and his team aspired to create the finest wines in the world. Mondavi operated six
wineries – brands in California:1) Robert Mondavy Winery - the brand consisted of four classes of
wine: Napa Valley, District, Reserve, and Spotlight; 2) Woodbridge – this product line accounted
for 76% of the company’s case volume and 57% of revenue in 2001; 3) Byron; 4) La Famiglia di
Robert Mondavi; 5) Arrowood; 6) Opus One. Mondavi acquired or launched several other
California brands over the years.

Through its international partnerships, Mondavi wanted to begin producing fine wine in other
regions or the world and to enhance its reputation as one of the world’s finest winemakers. Mondavi
explained: “ We sell two things - the quality of the image and the quality of the liquid. The
higher the quality of the wine , the higher the image and the more the consumer is willing to
pay for it.”
The human resources of the firm are the expertise and effort offered by its employees.

Resources are the productive assets owned by the firm. Capadilities are what the firm can do.
They must work together to create organizational capability. Possibly the most difficult problem in
developing capabilities is that we know little about the linkage berween resources and capabilities. So
how do Robert Mondavi Winery goes about developing new capabilities. Three approaches: 1)
acquiring capabilities(mergers and acquisitions); 2) accessing capabilities (strategic alliances-a
corporative relationship between firms involving the shairing of resources in pursuit of common
goals); 3) creating capabilities(this requires first, acquiring the necessary resources and, second ,
integrating these resources).
 Traditionally, Mondavi had been organized functionally with senior vice presidents in charge of
production, sales, marketing, finance and so on. In 2001 the company decided to reorganize its
operations into three distinct business units: RMW, Woodbridge and Joint Ventures & Small
Wineries. The firm linked executive compensation to the amount by which each unit’s returns
exceeds the firm’s cost of capital. The company implemented this new organization structure in order
to encourage the development of a clear and distinct competitive positioning for each brand. The new
structure gave the business units the opportunity to develop customized sales and marketing strategies
for each of the company’s product lines. In their most recent letter to shareholders , Mondavi and
Evans explained why they chose to adopt this new structure and why they established a separate
business unit for the joint ventures and smaller California wineries: “One reason is the importance
of brand clarity –we want to insure that the Robert Mondavi brand maintains its distinct
quality image in the marketplace and is not overextended into a generic , all-things to all-
consumers identity.”